Not seasonally adjusted, new home sales through June of this year tally up to 274,000. That's better than 21% growth over the same six-month period in 2014. Remember, last year at this time it became clear that 2014 was not going to signal a take-off.
So, after taking a careful look at new home sales for June, are you focused more on the month-on-month decrease of 6.8% in June, or the pace, seasonally adjusted, of increase over a year ago June: 18.1%?
Evercore ISI senior managing director Stephen East took the red flag headlines "with a grain of salt," given the noise in the Census data, and the commentary he and his team are hearing in the new home trenches. Here's his roll-up of the June numbers.
This year, if new home sales momentum holds up for a 20% lift over last year, a lot of builders will be happy campers, especially ones in Florida, Colorado, and parts of California. Texas may have its work cut out for it as the ecosystem around the nation's energy industry adjusts downwardly to historically low prices for barrels of crude oil.
Depending on where you're building, it may be either a great year or another nail-biter. If you're one of those waiting for a rising tide to lift all boats, and your boat hasn't been lifted yet, you'd better try another strategy.
We keep hearing that many private home builders may want--or need--to sell their firms. A good number of them were pressing hard to get a deal done toward the end of last year and before this past Spring selling period got underway, but once Spring selling got underway and builders got a bit of traction, they changed their minds. Maybe they could make a go of it after all, especially if acquisition and development financing kicked back in and they could land that off-market deal for lots that they knew they could get access to if they could put their hands on the capital.
Some fair number of those private builders are going to need to rethink, because even if they can get their hands on more capital, big publics will be redoubling efforts to head them off at the pass in the land game, even for smaller, boutique parcels.
Meanwhile, here's the scenario we see playing out over the next 12 to 18 months, and no, it's not a massive activation among Millennial buyers. They're going to be the market movers in 2017 and beyond. For the next stretch, mid-level Baby Boom buyers and Generation Xers moving into the more discretionary leg of their housing journeys are going to be what fuels mojo in the near term.
Many GenX parents are seeing their children off to college as we speak. These are pragmatic, practical, highly educated, and college-debt free 40-somethings.
They, and the "next wave" of Baby Boom buyers--whose needs may turn out to be different than cutting edge boomers who'd continued to flock to age-restricted, lifestyle communities for their retirements--will fuel positive growth for new-home sales for the back half of this year and through next year.
As Calculated Risk's Bill McBride shows in a monthly "Distressing Gap" chart, new-home sales have head-room vs. existing sales, and the next 18 months should see that gap begin to close. Historically, six or seven resales sell for every new home, and the rate now is 10 or 11 existing home sales per new home.
As we see it, the glass is half full.